Wednesday, 23 September 2015

Gold Under Pressure As Dollar Gains On U.S. Rate Hike Hopes

Gold struggled on Wednesday to recover from its losses over the previous two sessions, as the dollar hit its highest in nearly three weeks on expectations the Federal Reserve would hike U.S. interest rates this year.

Spot gold was little changed at $1,124.30 an ounce by 0330 GMT, after dropping 1.3 percent over the past two days.

The metal's slide follows a rally last week that took it to a near three-week high after the Fed's move to stand pat on interest rates. However, the U.S. central bank has also said it would move to increase rates later this year for the first time in nearly a decade.

Higher rates would dent demand for non-interest-paying gold, while boosting the dollar. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

"Persistent dollar strength will hamper the precious complex, whilst the timing of the first Fed interest rate rise will also add to the uncertainty and continued volatility," said MKS Group trader James Gardiner.

The Fed will likely hike interest rates in December, according to economists polled by Reuters who assigned a 60 percent probability of it happening. This has buoyed the dollar, which on Wednesday hit 96.484 against a basket of currencies, its strongest level since Sept. 4.

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